Summary

There is a little more FOMC interest and support for an April rate-hike than first presumed. A mid-year rate increase also remains a distinct possibility.

The market's rally effort on Friday fizzled, and it was all the bulls could do to stave off a cross below the SPX 20-day moving average line.

Earnings season gets underway: the tepid 0.5% expected increase in broad market earnings becomes a 3.0% increase when taking the Energy sector's results out of the picture.

It's too soon to assume the worst yet. On the other hand, it's not too soon to prepare for the worst even as we hope for the best.

Last week, stocks lost ground for the second time in three weeks. More than that, the major indices are now putting a great deal of pressure on some critical support levels. Worse still, we're seeing clear signs of waning bullish momentum. That's not to say that bearish momentum has developed yet. It is to say, however, this is how bearish momentum starts. The good news is, there's a ton - far more than usual - technical support in place ready to rekindle the bullishness that materialized in the latter half of February. It's just a matter of using it.

We'll put a closer look at those technical floors in a moment, right after a quick run-down of this week's most important economic data.

Economic Data

This past week's economic news was as light and as uneventful as originally figured. There were no major curve-balls. In fact, the only item of any real interest from last week was the release of the most recent FOMC meeting minutes. As it turns out, there is a little more interest and support for an April rate-hike than first presumed. A mid-year rate increase also remains a distinct possibility. Once again though, the Federal Reserve's voting members still want to see more concrete signs of economic strength before pudding that burden on the economy.

Economic Calendar

Source: Briefing.com

This week's economic dance card is quite full.

For starters, we're going to get a good look at March's inflation numbers, for producers as well as consumers. This is going to be one of the big data sets Janet Yellen and the rest of the Fed are going to be eying to make any interest rate decisions in the near future. Both the PPI and CPI rates are expected to move higher after a February lull. Either way, the annualized inflation rates are now approaching the Fed's targeted rates, but still on the rise.

Inflation Chart

Source: Thomson Reuters

The proactive Fed will likely want to nip strong inflation in the bud rather than give it a chance to race out of control. If either or both inflation readings come in as strong or even better than expected, or if any of the annualized inflation rates move above the 2.0% mark, don't be surprised if the Federal Reserve starts to take a much more hawkish tone than it has to date.

Also this week we're going to hear March's retail sales figures. Last month's numbers weren't particularly impressive, with declines on most fronts. Things should be a little better this time around, particularly without tepid auto sales dragging things down.

The chart below plots the bigger trends for most of the major retail sales stratifications.

Retail Sales Chart

Source: Thomson Reuters

Note that March is usually a very strong month relative to February's spending.

Last but not least, on Friday were going to hear March's industrial productivity and capacity utilization data. We saw some encouraging numbers on this front two months ago, at a point in time when we needed a glimmer of hope. Then in February, that strength faded. For March, economists are once again expecting a little weakness. If we actually get that weakness, all the recent chatter about economic malaise during the first quarter may well have been merited. We need a moral victory in those numbers.

Industrial Productivity and Capacity Utilization Chart

Source: Thomson Reuters

Stock Market Index Analysis

The broad market (NYSEARCA:DIA) (NYSEARCA:IWM) hasn't reached the point of no return yet, but it's getting close.

The daily chart of the S&P 500 (SPX) (NYSEARCA:SPY) tells the tale. After peaking on Friday from two weeks ago, the sellers dug in early last week and never relinquished control. Friday's close of 2047.6 was the lowest close of the week, and though it looked for a while like the bulls were going to draw a line in the sand at the 20-day moving average line (at 2042) on Thursday, that idea remains in question. How so? The index's rally effort on Friday fizzled, and it was all the bulls could do to stave off a cross below the 20-day line. That crossunder remains a distinct possibility; one bad day could do the trick.

S&P 500 & VIX Daily Chart

Click to enlarge

Chart created with TradeStation

Underscoring the brewing bearishness are two big red flags.

The first of those red flags is the way the Percent R line has fallen back under its 80 threshold. Although this isn't necessarily a bearish clue [the Percent R line needs to get and stay below 20 to become a bearish clue], it is a sign that the bullish momentum is waning.

So too is the fact that the MACD lines are now showing us a bearish divergence.

We're seeing similar red flags on the NASDAQ Composite's (COMP) (NASDAQ:QQQ) daily chart. After finally moving above the 200-day moving average line (green) a couple of weeks ago, the NASDAQ slipped back under it on Thursday, and stayed below it on Friday.

NASDAQ Composite & VXN Daily Chart

Click to enlarge

Chart created with TradeStation

Something else you'll see on both daily charts - the volatility indices are starting to test the waters of higher highs.

Neither has yet to clear their technical ceilings, the same way stock indices have yet to break under their critical floors. For the Nasdaq Volatility Index (VXN) that's 20 and 22. For the CBOE Volatility Index (VIX) (NYSEARCA:VXX), it's 17.0 and 18.6. If those respective ceilings are broken by the VXN and VIX at the same time the S&P 500 breaks below 2013 and/or the NASDAQ pulls below a pivotal floor at 4818, that's a concern. Until then, there's no major reason for concern.

The flipside of that coin is, until the S&P 500 breaks above a key technical resistance level at 2078 and the NASDAQ pushes its way above 4920, there's no decided reason to expect further upside either.

It should also be noted that even if the NASDAQ and the S&P 500 do break under their aforementioned support levels, that doesn't necessarily mean a catastrophe will ensue. Ebbs and flows are natural, and a break under the aforementioned support levels doesn't merit panic. Now, if the NASDAQ breaks below the 4700 area and the S&P 500 breaks below 1975, that would be a reason for panic. Those are the last of the potential support levels. First things first though.

Q1 Earnings Season Preview

With Alcoa (NYSE:AA) slated to report last quarter's numbers this week, the first quarter earnings season officially begins. Whether or not you can afford to get your hopes up is a matter of perspective.

As of the last look, the S&P 500 is expected to have earned $25.94 per share, up just a bit from the $25.81 it earned in the first quarter of 2015.

The biggest detractor is, of course, the Energy sector (NYSEARCA:XLE), which is projected to post a 44% decline in year-over-year income. That lull, though, should be the last of the oil-implosion-driven drubbings. Analysts' say this will be the last of the net-losses taken by the industry as a whole, though the profit margins from here will remain sub-par for the next couple of years. But, they should at least be profitable.

Interestingly, it's the Financial sector (NYSEARCA:XLF) ready to be the second-biggest drag on Q1's total earnings. The financial sector is projected to report a 14.5% dip in year-over-year income.

At the other end of the spectrum, Materials (NYSEARCA:XLB) are expected to grow income to the tune of 16%, and Healthcare (NYSEARCA:XLV) earnings are poised to rise 19%.

Whatever the case, the mere 0.5% increase in earnings the broad market is expected to post becomes a 3.0% increase when taking the energy sector's results out of the picture.

Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.